Occidental Petroleum

Overview

Occidental Petroleum is a major U.S. oil and gas producer and, unusually for an oil company, among the most aggressive corporate investors in direct air capture of carbon dioxide. Founded in 1920 and headquartered in Houston, its core business is upstream oil and gas in the Permian Basin, the DJ Basin, the Gulf of America, and international assets in Oman, the UAE, and Algeria, alongside a midstream and marketing segment and a direct air capture business run through its 1PointFive subsidiary. In a defining 2025 move, Oxy sold OxyChem, its chlor-alkali chemicals unit and long one of the largest in North America, to Berkshire Hathaway for $9.7 billion. The sale closed on January 2, 2026, with Oxy retaining OxyChem's legacy environmental liabilities and directing proceeds toward debt reduction.

Oxy is best known in financial markets for two things: then-CEO Vicki Hollub's $38 billion acquisition of Anadarko Petroleum in 2019, outbidding Chevronin a high-stakes war and loading the balance sheet with debt, and Warren Buffett's subsequent accumulation of roughly 27% of the company, about 264.9 million shares, making Berkshire Hathaway its largest shareholder by a wide margin. Buffett's position reads broadly as a long-term vote of confidence in U.S. oil demand and Permian resource quality.

Business segments

The Anadarko gamble

The 2019 acquisition of Anadarko Petroleum for $38 billion is the defining event in Oxy's recent history and the source of its main ongoing challenge. When Chevron announced a $33 billion deal for Anadarko, Hollub countered. Oxy secured a $10 billion preferred equity commitment from Berkshire Hathaway at a steep 8% dividend to finance the bid, ultimately winning Anadarko at $38 billion in cash and stock.

The logic was compelling: Anadarko's Permian acreage was extraordinarily high quality, its DJ Basin assets were world-class, and the combination would create a Permian giant capable of outsized returns in a sustained high-price environment. What Hollub did not anticipate, and no one could, was oil collapsing to negative $37 a barrel in April 2020, less than a year after closing. Oxy cut its dividend by more than 85%, issued equity at deeply diluted prices, and sold assets aggressively to service a debt load it had not planned to manage at $30 oil.

Oxy survived and has recovered substantially, paying down billions and restoring dividends. The Berkshire preferred equity, with its 8% annual dividend, remains a large fixed obligation: Oxy has redeemed about $1.5 billion of the original $10 billion, leaving roughly $8.5 billion outstanding, redeemable at Oxy's option from August 2029. Hollub's strategic instinct about the Permian has been vindicated by the subsequent performance of Anadarko's assets, and the debt-financed timing remains a case study in acquisition risk management.

Berkshire Hathaway's bet

Warren Buffett began accumulating Oxy common shares in early 2022, moving rapidly and publicly, since Berkshire must disclose large purchases within two business days under SEC rules. By mid-2026, Berkshire held approximately 27% of outstanding shares, about 264.9 million, plus warrants from the 2019 preferred deal for roughly 83.9 million additional shares at an exercise price of $59.59, adjusted down from $59.62 for dividend anti-dilution. Berkshire has received FERC approval to own up to 50% of Oxy, so a larger position remains possible.

Buffett's rationale, in Berkshire's 2023 annual letter, emphasized Oxy's U.S. oil production in the context of long-term energy security and the quality of Hollub's management. He praised the Anadarko acquisition as exactly the type of capital allocation he admires: conviction, scale, and a long-term orientation. The relationship deepened in 2025 when Berkshire agreed to buy OxyChem for $9.7 billion, announced in October 2025 and closed on January 2, 2026. Greg Abel, who succeeded Buffett as Berkshire's CEO on January 1, 2026 with Buffett staying on as chairman, fronted that transaction. Whether Berkshire eventually acquires more or remains a large shareholder, its presence gives Oxy unusual financial credibility and market support.

Direct air capture: strategic bet or distraction?

Oxy's investment in direct air capture is the most unusual strategic initiative of any major oil company. DAC uses chemical processes to pull CO₂ directly from ambient air rather than from a point source like a power plant, then either stores it permanently underground or uses it for enhanced oil recovery. Stratos uses Carbon Engineering's liquid solvent process and sits co-located with Oxy's Permian operations, where captured CO₂ can go into enhanced oil recovery in existing fields.

The strategic logic, as Hollub articulated it, is that DAC lets oil companies keep operating even as the world moves toward net-zero, by removing from the atmosphere the equivalent of the CO₂ emitted when their oil burns. Whether that circular logic satisfies climate commitments is debated. Less debated are the economics: first-of-a-kind DAC is widely estimated to cost several hundred dollars per metric ton captured, far above the roughly $50 to $100 per ton it would need to reach for climate-relevant scale. Oxy says costs should fall sharply at scale with subsequent facilities, and the pathway is long and dependent on policy support.

The 45Q tax credit is the policy support that makes Stratos viable today. The July 2025 One Big Beautiful Bill Act raised the DAC credit to $180 per ton and, importantly for Oxy, put CO₂ used in enhanced oil recovery on the same footing as CO₂ in dedicated geologic storage, having previously carried a lower value; that change directly improves the DAC-to-EOR model. Microsoft's carbon removal agreement adds revenue certainty. Skeptics argue that $1.1 billion for Carbon Engineering and hundreds of millions more for Stratos could have gone into Permian drilling at far higher returns. Supporters argue Oxy is positioning for a world where carbon removal carries monetary value and regulatory necessity, and that a first-mover position in DAC is strategically important.

Strategy & outlook

Near-term priorities are debt reduction and free cash flow from the expanded Permian position. Proceeds from the OxyChem sale and asset divestitures cut principal debt to $13.3 billion by May 2026, described as the lowest since 2019 and down from roughly $25 billion after the 2024 CrownRock acquisition, with the next stated milestone at $10 billion. Management has said the company no longer requires transformative acquisitions. For 2026, Oxy guided to capital spending of $5.5 billion to $5.9 billion, about $550 million below 2025, with production of roughly 1.43 million to 1.45 million barrels of oil equivalent per day. Production at that scale generates substantial cash flow at oil prices above $60 a barrel.

The 1PointFive business is a long-duration option on carbon removal becoming economically and regulatorily essential. Beyond ramping Stratos, the next project is a South Texas DAC hub on the King Ranch, where Oxy holds access to a large land position and storage potential. A DOE cost-share award for the hub has uncertain status under the current administration, and Oxy has signed a framework agreement with ADNOC's XRG to evaluate a joint venture there. The pace of buildout depends on carbon credit pricing, the 45Q credit, DOE support, and the cost reduction trajectory of the technology.

Key considerations

Oxy carries more debt than its supermajor peers, though the balance sheet is materially stronger after the OxyChem sale, with principal debt down to $13.3 billion. The larger fixed obligation is the roughly $8.5 billion of Berkshire preferred stock, whose 8% dividend costs about $680 million a year and cannot be redeemed at Oxy's option until August 2029. At $60 oil the company generates solid free cash flow after interest, capex, and the preferred dividend; at $50 oil the math tightens. The Permian assets are high quality, and the pace of further paydown depends on oil prices staying above breakeven.

The DAC investment carries significant execution and policy risk. The 45Q credit became more favorable under the July 2025 tax law, and federal support is not settled: the DOE cost-share award for the South Texas hub is uncertain, and Stratos startup has already slipped from an earlier end-2025 target into 2026. If carbon removal markets develop more slowly than projected, the billion-plus invested in Carbon Engineering and Stratos infrastructure will have generated poor returns. If DAC becomes essential infrastructure for net-zero compliance and credit prices rise, the early position could generate large returns.

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